Public Safety Personnel Retirement System (PSPRS)

Revision Date: 
Monday, August 31, 2020

AGENCY CONTACT INFORMATION

Public Safety Personnel Retirement System (PSPRS)

Authority

Established in 1968, the Public Safety Personnel Retirement System (PSPRS) administers the statewide retirement program for public safety personnel who are regularly assigned hazardous duty while employed by the state of Arizona or its political subdivisions. Statutory authority is found at A.R.S.§§38-841 et seq.

Function

PSPRS provides a statewide retirement system for public safety personnel (municipal firemen and policemen, employees of the Arizona Highway Patrol, and other public safety personnel) who are employed by the state of Arizona or a political subdivision. The PSPRS is funded through cost-sharing contributions from the member and member’s employer. PSPRS functions as either a defined benefit plan or a defined contribution plan.

The Board of Trustees provides oversight for investments and accounts for contributions received from, and benefits distributed for, each local board pursuant to A.R.S.§38-848.

Although the Board is not responsible for the actions or omissions of the local boards, it has the authority to seek review or rehearing in order to protect the System as a whole. The Board of Trustees is made up of nine members, appointed to five-year terms.

History

The PSPRS was created by Laws 1968, Chapter 85 in response to widely varying retirement benefits available to public safety personnel under local, municipal, and state retirement programs. Effective July 1, 1968, it put “public safety personnel who are regularly assigned hazardous duty in the employ of the state of Arizona or a political subdivision” in the PSPRS and took possession of the assets and liabilities accumulated under existing local, municipal, and state retirement systems, placing them in a special fund created for that purpose. Prior service credit was also transferred at the time of the PSPRS’ creation. See A.R.S. §38-841 for purpose clause.

When created, the PSPRS standardized employee contribution rates, benefits eligibility, types of benefit protection, and benefit formulas and provided a pension at the normal retirement age; in the case of accidental disability; or after 25 years of service. The pension amount was determined by taking 50% of a person’s average monthly compensation, less 50% of the amount of their Social Security benefit. Service greater than or less than 25 years increased or decreased the pension pay out as well.

Terminating service for any reason other than death meant the accumulated contribution was paid out in a lump sum. An annuity could be created instead of receiving the lump sum, provided the employee had at least 10 years of service. Additionally, pensions were provided for widows as well as guardians of eligible children of deceased members.

The system was to be administered by local boards for the Highway Patrol (later the Department of Public Safety), each county, each municipal fire department, and each municipal police department. An exception was made for state employees who were not in the Highway Patrol which required the Arizona State Retirement System (ASRS) board (rather than a separate local board) to administer hearings and claims for those state employees. Membership and eligibility requirements to serve on a local board were outlined in the legislation.

Local boards were tasked with creating and enforcing rules and regulations for the system, as well as providing a forum for grievances and hearings. Local boards did not handle any investing, though they were expected to review the performance of the fund manager and provide annual reports on their own actions as requested. They were also responsible for appointing a physician or clinic to act as a medical board for disability claims, as well as providing physical exams for new employees.

A fund manager oversaw the actual investments of the PSPRS. The fund manager actually consisted of three members, appointed by the Governor and approved by the Senate. The fund manager had sole and full discretion over investments, but could not invest too heavily in any one corporation or type of security. A report of contributions to the fund by employers and overall financial behavior of the fund was required from the fund manager.

Note: Since the PSPRS was established, a number of legislative enactments have modified the formula to determine annual benefits and to establish the years of service required in order to receive a pension. The reader should consult the PSPRS Annual Reports for year-by-year changes. Below are some major changes.

Laws 1971, Chapter 74 removed the amount of social security received from the pension calculation. That same year, Laws 1971, Chapter 143 reduced the number of years required to be eligible for a pension from 25 to 20 years of creditable service.

Laws 1972, Chapter 163 removed the requirement of Senate approval for the governor- appointed members of the Department of Safety local board.

Laws 1983, Chapter 300 allowed a member to receive up to 70% of their average monthly compensation, increasing the cap from the previous 60%.

Note: Statutory requirements related to creation and appointment to Local Boards changed over time. The reader should consult the PSPRS Annual Reports or other sources for year-by-year changes. Some examples follow:

 Laws 1980, Chapter 146 created a disability board of appeals, but was repealed three years later.

Laws 1982, Chapter 4 allowed a mayor or chief local official to appoint a designee as the chair of a local board, contingent on the approval of the respective governing body. Laws 1982, Chapter 111 provided the Governor no longer appointed three PSPRS members to make up state agency local boards, but three citizens instead. Two PSPRS members are elected to join them, at which time all five members vote on a chairman.

Laws 2010, Chapter 118 empowered the fund manager to appoint members of a local board if all vacancies have not been filled within 60 days of an employer’s effective date of participation in the PSPRS.

Note: Many changes and additions have been enacted regarding the groups participating in the PSPRS.

For example, between 1982 and 2001 additional local boards have been created for: Department of Public Safety, the Game and Fish Department, the University of Arizona, Arizona State University, Northern Arizona University (Laws 1982, Chapter 111); Department of Emergency and Military Affairs (Laws 1986, Chapter 88); police officers and firefighters employed by a nonprofit running a public airport (Laws 1988, Chapter 19); firefighters employed by fire districts (Laws 1989, Chapter 197); police officers employed by a community college district (Laws 1990, Chapter 411); county sheriff’s offices, county attorney offices, the Department of Law, and Indian reservation police and fire fighting agencies (Laws 1992, Chapter 341); Department of Administration (Laws 1994, Chapter 130; removed by Laws 2011, Chapter 27); Department of Liquor Licenses and Control (Laws 1995, Chapter 205); Arizona Department of Agriculture (Laws 1999, Chapter 327); county parks departments and the Arizona State Parks Board (Laws 2001, Chapter 353).

Laws 2011, Chapter 357 was an omnibus measure that modified each of the state retirement systems (PSPRS, CORP, EORP and ASRS). Section 55, Legislative findings, stated in part: “The Legislature recognizes that in order to have a sound public retirement system that benefits this state, taxpayers and member of the retirement systems, the public retirement systems must be funded with contributions and investment earnings based on actuarial methods and assumptions that meet generally accepted actuarial standards. ... The Legislature finds the current structures of ... the plans do not achieve this goal … and intends to modify and amend these various retirement programs in order to protect the best interests of the members and beneficiaries.”

The measure made a number of significant changes, regarding cost of living adjustments, return to work, member’s contribution rates, compensation, calculation of retirement benefits, and purchase of credited service. The measure also created the Defined Contribution and Retirement Study Committee to examine the feasibility and cost of transferring existing or new members to a defined contribution. A written report of findings and recommendations was required to be submitted to the Governor, Legislature and Secretary of State by December 31, 2012.

Laws 2016, Chapter 2 made a number of changes to the PSPRS, establishing a defined contribution plan, modifying its defined benefit plan, increasing the number of members of and selection criteria for the PSPRS Board of Trustees from seven to nine, and outlining Board fiduciary obligations and duties. The measure also created the PSPRS Advisory Committee to serve as a liaison between the Board, members and employers of the PSPRS. The measure included a conditional enactment clause, which meant that certain provisions would not become effective unless approved by the voters at a special election conducted on May 17, 2016. (The measure passed.)

Laws 2017, Chapter 235 established the Public Safety Employer Risk Pool consisting of any employer of an eligible group with 250 or fewer active members who were hired before July 1, 2017. The measure was drafted in response to legislation enacted in 2016, which included a number of reforms to PSPRS and included a requirement for the PSPRS Board to provide recommendations to the Legislature by February 15, 2017. See also Laws 2016, Chapter 2.

Laws 2019, Chapter 36 required the PSPRS Board of Trustees to establish, design and administer a deferred compensation plan for employees who are enrolled in a retirement system or plan administered by the Board.

Laws 2020, Chapter 79 established the Arizona Employers’ Pension Prefunding Plan and authorized the Public Safety Personnel Retirement System to establish a plan in order to prefund their required pension contributions.  The measure outlined PSPRS Board responsibilities for administration and investment, transfer of monies and assets by participating employers, and employer participation.  (Note: the measure also authorized the State Board of Investment to serve as trustees of pension prefunding plan investment accounts and outlined related responsibilities.  Those provisions are separate and not related to the PSPRS Board.)

Sources

  • A.R.S.§§38-841 et seq.
  • Session Laws
    • Laws 1968, Chapter 85
    • Laws 1971, Chapter 74 and Chapter 143
    • Laws 1972, Chapter 163
    • Laws 1980, Chapter 146
    • Laws 1982, Chapter 4 and Chapter 111
    • Laws 1983, Chapter 300
    • Laws 1986, Chapter 88
    • Laws 1988, Chapter 19
    • Laws 1989, Chapter 197
    • Laws 1990, Chapter 411
    • Laws 1992, Chapter 341
    • Laws 1994, Chapter 130
    • Laws 1995, Chapter 205
    • Laws 1999, Chapter 327
    • Laws 2001, Chapter 353
    • Laws 2010, Chapter 118 and Chapter 200
    • Laws 2011, Chapter 27 and Chapter 357
    • Laws 2016, Chapter 2
    • Laws 2017, Chapter 235
    • Laws 2019, Chapter 36
    • Laws 2020, Chapter 79

Arizona Public Safety Personnel Retirement System annual reports

Public Safety Personnel Retirement System (PSPRS) website

Related collections at Arizona State Archives

  • Record Group 239 – Public Safety Personnel Retirement System